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Wednesday, 13 March 2013 10:18

Mary Jo White and the Incestuous Mutually Beneficial Relationship Between Regulators and Wall Street

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bankfailfinalBill Moyers and Michael Winship wrote recently about the revolving door syndrome regarding prosecution and financial regulatory agencies in DC. They began their commentary by focusing on President Obama's nomination of Mary Jo White to head the Securities and Exchange Committee (SEC):

In our last episode of that ongoing Washington soap opera, “As the Door Revolves,” we introduced you to former federal prosecutor Mary Jo White, pursuer of drug lords and terrorists, who left government to become a hot shot Wall Street lawyer defending such corporate giants as JPMorgan Chase, UBS, General Electric and Microsoft. Oh yes — and former Goldman Sachs board member Rajat Gupta, currently appealing his insider trading conviction.

The New York Times reports that White and her husband, who’s also a corporate litigator, have a net worth of at least $16 million and investments that might be valued as high as $35 million. Now, courtesy of President Obama, Mary Jo White’s been named to head the SEC, the Securities and Exchange Commission — the very agency that regulates her clients and everyone else doing business in the stock market.

But as they say on late night TV, wait — there’s more! Join us for our latest episode of “As the Door Revolves” in which the door spins even faster between the SEC and big business. According to a major new report from the nonpartisan watchdog POGO – the Project on Government Oversight — hundreds of the agency’s former employees have done or are doing business with the SEC on behalf of the corporations the agency is supposed to regulate.

This is the revolving door between regulators and corporate lawyers and lobbyists that Obama promised to end, but the door is still rotating at a rapid pace – and the incestuous mutually beneficial relationships between regulators and the regulated continues unabated.

In a commentary in the business section of the Seattle Times, Jon Talton criticizes White's nomination as the same-old, same-old:

White is a classic example of the revolving door between government and Wall Street. She was a federal prosecutor during the Clinton administration and then went to work for Debevoise & Plimpton, a prestigious New York law firm. It was instrumental in defending the Too Big to Fail Banks after they helped bring on the near collapse of the world financial system and the Great Recession, ultimately being rescued by your tax dollars. White acted as a lawyer for former Bank of America Chief Executive Ken Lewis, JPMorgan Chase, Deloitte & Touche, and former Goldman Sachs director Rajat Gupta, who was sent to prison for conspiracy and securities fraud. Other clients of the firm include Morgan Stanley, UBS, General Electric, HCA and Siemens.

The list of cases she would have to recuse herself from is potentially long. The social circle in which she has moved for a decade — and no doubt wishes to return to — is not conducive for curiosity or holding the powerful to account. Indeed, her husband, John White, is a partner at Cravath, Swaine & Moore,  another powerful Wall Street law firm representing clients facing SEC scrutiny. John White also sits on the advisory council of the Financial Accounting Standards Board, which in 2009 allowed the big banks to value their assorted hustles however they wished.

Not only that, but Mary Jo White will be collecting $42,000 a month in retirement pay for life from Debevoise & Plimpton. As Bloomberg reported, “This means she has a direct interest in Debevoise’s future profits, and therefore an incentive to help make sure only good things come the firm’s way. Debevoise’s partner-retirement plan is unfunded, meaning the firm pays benefits from its continuing business operations.”

On Truthout, Richard Eskow was guardedly hopeful about White as head of the SEC. But his hope is tellingly undercut by a key reservation he expresses in his commentary: "It’s easy to lose your edge once you become part of a social circle. Jailing your friends and clients begins to feel unimaginable."  Therein lies the rub for a Mary Jo White. And it is the Justice Department that pursues criminal charges, not the SEC in any case. The SEC just more or less generally slaps wrists with fines and maybe a license suspension now and then.

As BuzzFlash at Truthout has repeatedly noted, Attorney General Eric Holder and his Covington and Burling corporate law firm chieftains at the DOJ have not prosecuted one financial titan for massive financial illegalities.

White will be confirmed because corporate interests do not oppose her, a telling sign in and of itself. In her hearing before the Senate Banking Committee, the Washington Post writes, "Mary Jo White faces no opposition at SEC confirmation hearing": "The hearing was a letdown for anyone expecting fireworks. Not a single senator voiced even slight opposition to President Obama’s pick to head the Securities and Exchange Commission, despite previous concerns by some about her ability to effectively police Wall Street."

White, in her own defense, told the committee, "If I’m confirmed, the American public will be my client, and I will work as zealously as is possible on behalf of them."

On her background page at the pricey New York corporate law firm where she has practiced on and off, Debevoise and Plimpton LLP, part of her write up includes this paragraph:

Ms. White’s practice concentrates on internal investigations and defense of companies and individuals accused by the government of involvement in white collar corporate crime or Securities and Exchange Commission (SEC) and civil securities law violations, and on other major business litigation disputes and crises. For her criminal work, she leads a Debevoise team that includes eleven former Assistant U.S. Attorneys with extensive experience in major commercial investigations and prosecutions.

Those who see the appointment of White as a glass half full are betting that she will revert to her years as a prosecutor of white collar crime rather than to her years as a highly-paid lawyer defending those accused of financial and corporate illegalities.

Given the rule of the corporate and governmental elite in DC, who tend to be the same people just changing chairs back and forth, it might not be wise to expect anything more from Mary White than the nation is getting from Eric Holder in terms of holding their social and professional peers accountable.

Besides which, when it comes to their personal fortunes, White and Holder and so many of their governmental enforcement colleagues make their millions from representing the financial institutions and corporations that they are supposed to be regulating and prosecuting to ensure a just and transparent financial system.

Thus far, we've seen how that arrangement doesn't work on behalf of the American people, who are supposed to trust the credibility of our investing and banking system. 

It works on behalf of regulators and prosecutors who amass wealth -- in the private sector -- from those in their social and professional circles committing the illegal and deceptive acts.

Their stint in government, one can speculate, is just a resume enhancement that will enrich them even further when they return to the private sector.

(Photo: DoctorTongs)